SEC Enforcement Chief Khuzami Is Leaving

Robert Khuzami, the enforcement director at the SEC, said he is leaving the agency.

WASHINGTON -- Robert Khuzami, the
enforcement director at the U.S. Securities and Exchange
Commission who worked to rebuild its tarnished image after the
Bernard Madoff scandal and the financial crisis, said on
Wednesday he is leaving the agency.

Khuzami follows SEC chairman Mary Schapiro and several other
high-profile SEC officials who have stepped down since President
Barack Obama's re-election in November.

The SEC did not name a replacement for Khuzami, who is
expected to leave at the end of the month.

Agency insiders say candidates for the job could include the
SEC's deputy enforcement director, George Canellos, and the
regional director of the SEC's Boston office, David Bergers.

The new enforcement chief will have to address a still-large
pipeline of cases stemming from the 2007-2009 financial crisis.

While the SEC brought a record 735 enforcement actions in
fiscal 2011 and a near-record in fiscal 2012, that ended Sept.
30, the agency also faces criticism that it has not been tough
enough in holding top executives accountable for their roles in
the crisis.

Khuzami, a former federal prosecutor in the U.S. Attorney's
Office in Manhattan, was tapped by Schapiro in early 2009 as the
SEC was still reeling from the fall-out of the Madoff case.

Madoff's $65 billion Ponzi scheme went undetected by the SEC
despite numerous red flags going back to the early 1990s. That
failure, along with problems in the SEC's oversight leading up
to the financial crisis, raised questions about the agency's
credibility and willingness to crack down on wrongdoers.

Khuzami said on Wednesday he is most proud of how the SEC
used the Madoff episode as an opportunity to learn from its
mistakes and become a more forward-looking agency.

"We are now more proactive. We are finding stuff earlier,"
he said in an interview. "We are not just reacting to
headlines."

Former SEC staffers say Khuzami will most likely be
remembered for undertaking the largest reorganization in history
of the enforcement division with the creation of five
specialized units in structured products, asset management,
market abuse, municipal securities and corporate bribery.

He also helped to establish a new Office of Market
Intelligence, which created a central database and method for
analyzing all tips, complaints and referrals.

Stephen Crimmins, a former deputy chief litigation counsel
in SEC enforcement who is now a partner with K&L Gates, said he
thinks Khuzami will be remembered as a "strong leader in very,
very difficult times."

"Khuzami has projected an image of a larger-than-life tough
prosecutor, and that is what was needed," said Crimmins.

Some critics of the agency have questioned why the SEC has
not brought any cases against Deutsche Bank, where
Khuzami worked as the top lawyer for the U.S. unit during a
period when it was heavily involved in packaging subprime
mortgages into securities, a practice that has been linked to
investor lawsuits and regulatory scrutiny at other banks.

In response, Khuzami said he had already spent 12 years as a
prosecutor before ever working on Wall Street.

"If I had some inappropriate sympathy for my former
employer, I wouldn't have come in and in six weeks torn the
place up and created specialized units to focus on exactly the
kinds of things that they and other banks were doing," he said.

Many of the cases Khuzami's office brought were linked to
financial crisis behavior by companies such as Citigroup,
Credit Suisse , JPMorgan Chase and Goldman Sachs,
which paid a record fine of $550 million to settle claims that
it misled investors about a subprime mortgage-linked investment
product.

The SEC also has raised its profile by filing major
insider-trading cases, winning a $92.81 million settlement with
the now-imprisoned Galleon Group hedge fund manager Raj
Rajaratnam.

Khuzami said he has not decided yet what he plans to do,
though he said it is unlikely to involve a job in academia.
"Everything else remains on the table," he said.